This is a revised version of a Program Project renewal, concerned with the developmental biology of the lung. The revised proposal has been altered in response to the reviewers' comments. The theme of the grant, is now and has been the exploration of molecular mechanisms regulating epithelial cell differentiation in the developing lung. The four projects of the original grant have produced 27 manuscripts, most co-authored by several project leaders. Two new faculty with expertise in transgenic and gene knockout technology have been added. The four projects continue themes begun in the initial grant, but are more focused in their hypotheses and goals. Each project examines a distinct mechanism of gene regulation in the developing lung. Project 1 defines the transcriptional regulation and function of a gene, discovered by us. It is the only well-defined marker of the alveolar type 1 cell and is likely a regulator of ion and/or water transport in lung and brain epithelia. Project 2 explores a new hypothesis that the change in oxygen concentration occurring at birth is an important regulator of gene expression in the perinatal lung and defines molecular mechanisms of this regulation. Project 4 examines the relationship between embryonic lung cell proliferation and differentiation, focusing on the pRb family of proteins, an E2F transcription factor we have cloned, and CPB/p300 a new co-activator of gene transcription. Project 5 explores the relation between pattern formation and lung cell differentiation, examining the role that the fibroblast family of growth factors and receptors, Hox genes, and sonic hedgehog play in regulating epithelial-mesenchymal interactions that guide embryonic lung development. While each project deals with a different mechanism of gene regulation, the extensive interactions of the investigators, the shared reagents and experimental systems together with the focus on epithelial cell differentiation, provide a unique opportunity to study interactive aspects of lung cell gene regulation.